The forex currency market trading is very complex and unique. Potential traders are advised to learn and better understand all the intricacies that come with this market.
Here is a short summary traders need to know.
- As an electronic over the counter market, forex is open to trading 24 hours a day worldwide, 5 days a week where traders trade currencies.
- Currencies are quoted directly or indirectly and are rated in currency pairs.
- Currencies are composed of two prices which is the bid and ask price. Bid is the price the market will purchase the currency in connection to the base currency. Ask is the amount you can sell a unit of the base currency in connection to the quote price.
- The present currency exchange system was molded through adopting and discarding a number of global currency systems from the past. Most countries adopted floating exchange rates as a result.
- In the forex market, huge leverages are available for investors to acquire large positions with minimal investment
- Large players in forex market are the central banks, governments, banks and other financial institutions, speculators and hedgers.
- Parity conditions like inflation and interest rates are the main theories of economy in forex.
- Fundamental analysis gathers information on a currency’s true value through economic announcements. This is what forex traders use to view currencies.
- Technical analysis uses tools like charts, indicators and trends to view currencies. This is what forex traders use to view currencies similar to assets.
- In forex, there is close to zero commission and fees. New traders should still be cautious when trading and utilize orders like stop-loss and take-profit to lessen losses.